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Mobility as a Service (MaaS) is not like Spotify

Posted on: 10 Mar 2017

Author: Marko Javonrik, General Manager

The second edition of Cosmos conference in Ingolstadt has just wrapped up. For the second time, my dear friend Prof. Harry Wagner – a top German expert on Smart Mobility – organized a conference around mobility services. It’s a perfect opportunity to reflect on what happened in the last year.

First, there is a noticeable difference in the awareness and acceptance of a new and different concept for solving our mobility needs – Mobility-as-a-Service (MaaS). While there was still quite some skepticism about the concept a year ago, today most people seem to be on board with the efforts to look for a more efficient and sustainable mobility system.On the other hand, I am reflecting on my speech at the inaugural event last year, when one of my key messages was that: “MaaS is just like Spotify – instead of consuming a product, we consume a service through a digital platform and reap the many benefits that the digital technology can bring about.” And everyone knows CDs were largely replaced by streaming music, so the analogy seemed more than appropriate at the time.

This year I met prof. Wagner again – a year older, a year wiser and a lot more experienced in the field. And I needed to admit: “I was wrong. MaaS is really essentially different from Spotify.”

Let’s take it step by step. I still sincerely believe that mobility will become digital so that we will begin consuming it through digital platforms in the form of services. The benefits and value for end users, cities and innovators are simply too large to miss out on. And it’s right in front of our nose – 1.2 billion cars are idle 95% of time and when we do use them, 2/3 of their capacity is wasted, their energy efficiency is poor and the wrong type of engine is used for most of the trips (unnecessarily causing pollution), not to mention how we waste precious space, especially in the cities. It is simply impossible to imagine that we would leave this value wasted for long with so much technology innovation out there. In this respect – yes, MaaS will happen similar to how Spotify happened to music and I believe it will happen soon.

However, when we observe the progress in the market, it is getting clear that aggregating mobility ecosystem is a substantially more complex problem than aggregating music, movies, books or even hotels for that matter.

Let’s look at Uber as the key player in the market that essentially launched the digital mobility services revolution. As soon as Uber became a real player, there were many stakeholders that pointed out the negative characteristics regarding their approach. I don’t like it when marginal negative observations are made and overshadow the incredible innovation that Uber brought to market. In just 5 years or so we’ve reached a point where over 25 million rides happen every day on Uber-like ride-sharing platforms. Clearly there is substantial new market value generated and the companies doing this are not unicorns by lucky chance. Nevertheless, for the first time it seems that their business model is seriously losing its steam. And it’s not really the ethical issues that were in the media a lot over the past few weeks. While they are certainly relevant, they are not a fundamental flaw in their business model. The real problem that I see is the negative impact on public transport which is starting to become obvious.

The basic promise of Uber and similar platforms is that they will make city transportation better. I remember the bullish statement from Travis when speaking in Berlin about a year ago, preparing the ground for further expansion in Europe – “When Uber comes to a city, congestion situation improves within the first 6 months.” Which mayor in the world could resist something as sweet as this? A recent EU study showed that congestion is the #1 issue for the cities with respect to transportation. Uber seemed unstoppable at the time. And I have seen some evidence that confirmed Travis’ claims. Uber does indeed decrease congestions in the first six months.

The progressive spiral goes like this – people start using digital mobility services instead of private cars. They replace an extremely inefficient transportation mode with a better one, and the world becomes a nicer place. And the platform becomes stronger day by day, so it only gets better. In this progressive loop, all mobility services should win, including the public transport. I mean, if people are giving up private car use, at least a few rides should also move to mass transit, right?

It now seems that a critical point has been reached – at least according to data from New York, which is tracking the progress of Uber and similar providers better than most cities in the world. It seems that ride-sharing platforms became overly aggressive (especially compared to other modes of mobility services) and started spinning the spiral in a negative way – taking people off the mass transit to a less efficient mode of transport. This will certainly not make any mayor happy. And it is certainly not getting us closer to a sustainable mobility system which is so badly needed. Even when Uber uses autonomous electric mini-buses, the cities will still likely want to keep people using mass transit for certain types of journeys.

On the other hand, the top-down aggregation of mobility services is also happening much slower than one would expect and hope for. And there are several valid reasons for this: no transportation provider wants to give up their touch-points to end users, the aggregation itself initially brings very little value to the ecosystem and the fears from the experience of other industries are an additional barrier. People realize that aggregators got the bigger share of the pie in the past. And then there is also politics, which is simply unavoidable in something as strategic as a city mobility system.

All of this makes me believe that the aggregation of a MaaS ecosystem will not follow the path of some other industries that have already transformed into a digital platform economy. I see that significant innovation will be needed in terms of business models and value chains as well as aggregation technology.

I was wrong – it will take much more than a Spotify to lead us into the MaaS world. A lot more effort will be needed to create a truly sustainable digital-platform based mobility system. However, this does not mean that we should give up. In fact, it is the opposite – it just means that the race for innovation became truly exciting again. There are so many incredible inventions out there that are just waiting to be integrated in a better way and with a more efficient business model. It’s time for Uber-lovers and Uber-haters to get back to the drawing board and start innovating again. And most importantly – they need to realize that MaaS will be a collaborative effort of an ecosystem of partners, it’s simply too big and too complex a job to be served by a single company. It will likely be an open-innovation alliance of similar minded innovators and entrepreneurs, who share the same vision and purpose: to use technology for smarter mobility that will make our world a truly better place for us all!